h10 fall final ch. 14-15.docx - 14.1 The Nations Sick...

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14.1 - The Nation’s Sick Economy Economic Troubles on the Horizon - problems threaten economic prosperity - farmers produced more food than they could sell at profit - began gambling on stock market Industries in Trouble - Gilded age: superficial prosperity of late 1920s hid weaknesses that led to Great Depression 1930s - basic industries like textiles, steel, railroads barely made profit - railroads lost business to new forms of transportation (trucks, buses, private automobiles) - textile mills competed with foreign producers in Japan, India, China, Latin America - mining and lumbering (big during supply wartime in WW1), but decreased in demand when ended - coal mining suffered bc of stiff competition from new forms of energy like hydroelectric power, fuel oil, natural gas. In 1930s, these source supplied more than half the energy that once came from coal - boom industries from 1920s like automobiles, construction, consumer goods weakened - applications for new building permits dropped 25% - new houses require building materials, new furnishings, new equip, new appliances, construction jobs - furniture companies expected expanding market, but produced too many goods and cut their labor forces to reduce inventories Farmers Need a Lif - agriculture suffered most 1920s. WW1 international demand for crops like wheat and corn raised prices - farmers planted more crops and took out loans to buy land and equip - after war, demand for farm products fell, crop prices fell 50% - compensate for falling prices, farmers raised production and hoped to sell more crops → worsened prices. 1919-21, annual farm income went from $10 billion to $4 billion - farmers in debt couldn’t pay off their loans. Lost their farms when banks foreclosed and seized property as payment for debt - prop up farm sector, Congress proposed legislation McNary-Haugen bill - proposal called for federal price supports - support of certain price levels at or above market values by the gov’t for key product. Bill had 3 major provisions - gov’t would buy surplus crops like wheat, corn, cotton, tobacco at guaranteed prices that were higher than market rate - gov’t would then sell these crops on the world market for lower prevailing prices - to make up for losses caused by buying high and selling low, gov’t would place a tax on domestic food sales, thus passing the cost of farm program along to consumers - bill was passed twice, but President Coolidge vetoed it Consumers Have Less Money to Spend - late 1920s, ppl bought less bc of rising prices, stagnant wages, unbalanced distribution of income, overbuying on credit in previous years even as farms/factories produced more - production expanded faster than wages → big gap between rich and poor Living on Credit - ppl often bought goods on credit - arrangement in which consumers agreed to buy now and pay later for purchases, often on an installment plan (usually monthly payments) that included interest charges - to make credit more easily available, businesses encouraged ppl to pile up large consumer debt
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